Property investors hit power up

Investors return ahead of rate cuts

Credit growth was once again solid in December, rising by 0.6 per cent for the month and 6½ over the year (considerably quicker than the 4.8 per cent seen in 2023).

Business credit growth is still humming along, rising 0.8 per cent for the month, and 8.9 per cent over the year.

Housing credit growth picked up a tick further, from 0.50 per cent in November to 0.51 per cent in December 2024.

Over the year, housing credit growth was solid at 5½ per cent over the 2024 calendar year (versus 4½ per cent in 2023).

By far the most notable takeaway from these figures was the rapid resurgence in property investors coming into the market, with credit annual growth to landlords again jumping from 4.7 per cent in November to 5.1 per cent in December.

Investors are evidently gaining confidence, anticipating high rents, a housing shortage, and lower interest rates in 2025.

Housing prices are off their peaks by -8 per cent in Hobart, -6 per cent in Melbourne, -6 per cent in Canberra, and -2 per cent in Darwin, but still the housing credit impulse remains very solid.

The aforementioned price declines were largely a result of more auctions and more available stock on the market in the selling season towards the end of 2024.

Looking ahead, markets are looking for three or four interest rate cuts this year, which should stimulate the next housing market cycle, with an investor renaissance amplifying the trends.

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The Producer Price Index figures for December 2024 eased to 3.7 per cent, down from 3.9 per cent in the September 2024 quarter, according to the ABS.

James Foster with the brilliant graphic, overlaying these statistics on the Consumer Price Inflation data:

As was previously the case with consumer price inflation, this is the lowest rate of price growth since 2021. 

Alex Joiner of IFM Investors noted that residential construction output cost inflation has moderated, but prices still remain high, potentially making life very difficult for developers to deliver more supply in 2025.

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3¾ million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,800 followers. 

By the way, I'm an 8-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

Gold price hits all-time high

Gold fires

Export prices bounced modestly over the past quarter, up 3.6 per cent, but were down -8.6 per cent through 2024 overall. 

Import prices were modestly lower over the year, down -1.9 per cent, with the recent weakness due to petrol prices and telco equipment. 

Unsurprisingly, the drop in export prices was down to Australia's main export commodities, being the bulk commodities of iron ore and coal, as well as gas prices well down from their pandemic highs.

One amazingly bright spot has been the gold price, which has bolted to all-time highs, rising 10 per cent on the export price index in 2024, and making new all-time highs today. 

Gold has traditionally been seen as a hedge against uncertainty and inflation, and as the money printer fired up in 2020 the gold price has been on a tear. 

Former star trader Gary Stevenson of Gary's Economics - who, to be honest has been right about everything else through the past few years - explains why you need to aim to own a home in the current environment:

Why you need to own your home. pic.twitter.com/vajNh37hiY

— Gary Stevenson (@garyseconomics) January 27, 2025

What lower inflation means for property (3 likely effects)

Mortgage rates to fall

The inflation figures have been considerably softer over the past six months, to the extent that market pricing is for an interest rate cut as soon as next month (approximately 95 per cent priced in). 

The private sector of the economy has basically been in recession - and the national economy is in recession, on a per capita basis - but the government has been dropping some pretty heavy spending, and a surge of hiring across non-market sectors means that the unemployment rate is still low, at only 4 per cent.

Therefore, although interest rates are expected to fall over the next 12 to 15 months, there's only about 90 basis points of easing priced in for this cycle. 

Source: ASX

Falling interest rates have nearly always proven to be bullish for Aussie housing, but what does this mean for the property market in this cycle?

3 property market impacts

Firstly, the fact that interest rates are likely now heading down instead of up should have a positive psychological bearing on market sentiment. 

Most households are managing just fine, but so too are plenty feeling the effects of mortgage stress, and some relief will be welcomed. 

Secondly, despite considerably lower rates of inflation, borrowers shouldn't expect to be paying ultra-low mortgage rates again any time soon.

A borrower paying a mortgage rate of 6½ per cent on a loan today might expect to find a rate on a similar mortgage deal of around 5½ per cent about a year from now...but perhaps not much lower than that. 

Borrowing capacities should increase over the next year as interest rates fall and incomes increase, but for the time being the market regulator still has a 3 percentage points assessment buffer to protect borrowers from rising interest rates (which aren't actually rising, by the way, but that's a debate for another day!). 

Indeed, anyone who's gone through the stringent process of applying for a mortgage in recent times knows just how laborious the exercise has become, even though the macro environment for lending is totally different from the previous cycle.

Only 11 per cent of loans by value are now on interest-only terms, versus 39 per cent in 2017, for example, while the perceived riskier lending cohorts have been strangled significantly since a decade ago. 

Thirdly, this might prove to be the fillip that's need to help developers gain confidence to kick off more medium-density and higher-density projects in 2025.

Insolvencies across the sector ran very high in 2024, while higher borrowing and steepling materials costs made developing new medium-density projects in the larger capital cities often unviable.

But we're through the nadir for the construction cycle, and housing starts should begin to lift as this year rolls on.

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3¾ million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,800 followers. 

By the way, I'm an 8-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

RBA set to cut in February?

Inflationary pulse dies

Inflation was softer than market expectations in the December 2024 quarter, at just 0.2 per cent, taking annual inflation down to a 4-year low of 2.4 per cent.

A fair chunk of that weakness was down to government subsidies, of course, for transport fares, energy, and rental assistance.

The quarterly core or 'trimmed mean' inflation figure was also lower than market expectations at 0.51 per cent. 

Looking at the 6-month annualised figure for core inflation, it's clear than the inflationary pulse has died, and markets are now pricing for an interest rate cut an February as about 90 per cent likely.

The weighted median core inflation figure - mathematically speaking less impacted by government subsidies - also came in soft, at just 0.53 per cent.

Incidentally, the ABS also runs a monthly inflation gauge, which saw the annual reading for trimmed mean inflation drop from 3.2 per cent to 2.7 per cent in December.

Tradables inflation has levelled off, and may even rebound a little in 2025 given the lower Aussie dollar, but domestically non-tradables inflation is dropping quite quickly. 

The residual inflation was seen in insurance, airfares, holiday accommodation, and with the largest contribution coming from alcohol and tobacco (albeit so many ciggies are sold on the black market these days, one wonders how relevant the sin taxes on tobacco really are). 

Although consumer price pressures have been undoubtedly painful since the pandemic lockdowns, it's worth noting that this did come off the back of six years where the opposite was true, and the economy was often seen to be running with an output gap.

Finally, the Reserve Bank should get a bit of a free kick from lower rental price inflation in 2025.

SQM Research's asking rents index has levelled off, but this will take some time to flow through to the official ABS inflation data for actual rents paid by consumers. 

There have been some brutal increases in Perth rents of late, but equally rents in Perth did fall for a period of several years before the pandemic.

The wrap

Overall, there was softer than expected inflation in Q4, of just 0.2 per cent, following on from a similarly weak figure of 0.2 per cent in the preceding September 2024 quarter. 

This time around the core inflation figures were softer as well, giving the Reserve Bank plenty of scope for easing interest rates as 2025 progresses as a risk management tool. 

Australia's 1-year government bond yield fell by 6 basis points on the softer than expected figures, from 3.92 per cent to 3.86 per cent.

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3¾ million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,800 followers. 

By the way, I'm an 8-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

Inflation this week...a short preview

Inflation figures due

Inflation in Australia peaked later than in some other countries, partly due to border closures and a slow reopening, and so it's taken longer for the rate of inflation to get back to target.

Over the year to September 2024, headline inflation was 2.8 per cent, helped lower by subsidies for energy and rent assistance.

The trimmed mean inflation figure, which strips out some of the noise, was 3½ per cent. 

Source: ABS

On Wednesday morning, the ABS will release the quarterly inflation figures for December 2024.

Rents have levelled off now, and the housing component overall is likely to be negative.

While there's expected to be the usual contribution from alcohol and tobacco taxes, it's not exactly clear to me where else inflation is going to come from this quarter. 

Insurance and airfares, maybe.

The median market forecast from economists is for quarterly headline inflation of just 0.4 per cent, which would take the annual figure down to around just 2.6 per cent. 

Again,  some of this softness will be down to energy rebates and rent assistance.

The trimmed mean inflation figure is expected to be 0.6 per cent, but there's some potential for downside risk year, and a figure that rounds down to 0.5 per cent.

Although the annual figure would be about 3.3 per cent for trimmed mean, there has been a notable deceleration in the inflationary pulse, and the 6-month annualised pace would be well within the target range. 

Of course, these figures are being so closely watched, because a soft result would clear the path for interest rates to fall in 2025 (or a hot print, would keep interest rates higher for longer). 

The figures are due for release at 1130 AEST on Wednesday.

---

P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3¾ million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,800 followers. 

By the way, I'm an 8-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

2-Sense: How many borrowers are in hardship?

2-Sense podcast

Happy Australia Day to those celebrating.

This week on the podcast, Batesy and I discussed how many borrowers are in hardship, Trump taking the reins and demanding government employees return to the office 5 days per week, and the implications for Aussie property.

Tune in here (or click on the image below):

You can also watch the video version here:

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3¾ million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,800 followers. 

By the way, I'm an 8-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

Land prices rising faster than inflation (HIA)

Land prices surge

From the Housing Industry Association:

Regional land prices have not been so hot, causing more buyers to look at land releases away from the capital cities. 

Webinar: Property fundamentals & the 2025 outlook

RealWay webinar

I joined Eric Wu from RealWay Finance in this webinar to talk about all the issues facing property this year, and my predictions for the year ahead.

Tune in on YouTube here:

Housing supply far below target

Housing supply slows

Housing starts increased only slightly to 43,247 in the September 2024 quarter, meaning that the government's target of 1.2 million well-located homes in 5 years remains a distant dream.

Dwelling completions remain sluggish with many projects stalling, and completions declined to 44,884.

Detached house commencements have been solid, picking up by 20 per cent over the past year, with a decent homebuilding outlook for Perth, Adelaide, Brisbane, and Melbourne.

Attached dwelling starts remain low, however, at under 15,000 nationally.

Ostensibly there is still a decent number of projects in the under construction phase, but this doesn't seem to be translating to any pick-up in actual completions.

Around the states, Melbourne now has a declining pipeline for unit supply.

Finally, the number of dwellings approved but not yet commenced declined to around 30,000.

The wrap

Overall, there was the expected increase in housing starts, but only to around 43,000, versus the stated target of 60,000.

Actual dwelling completions declined, with record insolvencies dogging the construction sector. 

The housing supply shortfall of 15,000 this quarter, will thus be 30,000 in the December quarter, 45,000 the March quarter, and 60,000 by the end of June this year. 

On the plus side it does look as though detached housing supply could get up to 30,000 per quarter, but building unit developments just isn't profitable enough under today's settings. 

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P.S. Whenever you’re ready…here are 5 ways I can help you manage your own money and go next level wealth:

1. Boom or Bust – 20 minute online workshop for investors

Register for my next free online training - Boom or Bust? How to change your investment plan - book in here

You also download a free copy of my e-book The Only 6 Ways to Become Wealthy here.

    2. Download our property buying guide

Download our free property buying guide here. 

You can also check out a few of our recent property investment purchases here. 

Get in contact with us today if strategic property investment is your thing. 

    3. Subscribe to our Top 10 Podcasts for Investors

Listen in to our podcasts

The Australian Property Podcast is rapidly becoming one of Australia's biggest business podcasts, now with well over 50,000 audio downloads per month, and growing fast.

And our popular Low Rates High Returns Show also remains available on Spotify.

    4. Subscribe for my free daily blog

Subscribe for my free daily blog with some 3¾ million hits here. 

You can also catch up with me daily on Twitter here, where I'm active daily and have over 14,800 followers. 

By the way, I'm an 8-times published author on finance and investing, so you can check out some of my books here.

My new book, co-authored with Cate Bakos is available to buy here or on Amazon here - follow our book release on Facebook here and at our Buy Right podcast series here. 

5. Work with me privately

For a limited time you can book in a free diagnosis call with me here, so book in a call today.

Trump hauls millions back to the office

Working from home shifts

It was President Trump's first full day in office, and an executive order has already been signed to demand that all Federal employees must return to the office five days per week.

94 per cent of government employees had either been working from home part-time or all of the time, with many agencies seeing around half of their staff working fully remotely. 

Naturally this led to some enormous rental vacancies across government headquarters, and plenty of wastage.

The order issued on Monday will impact millions of workers across all US government departures and agencies. 

And the move may in turn result in a wave of voluntary redundancies. 

A statement was posted on the White House website here:

Source: White House

Of course, Trump was a realtor with commercial interests, and this move perhaps isn't entirely unexpected in America. 

However many countries across Europe have seen productivity sinking far behind that of the US, and if the US powers further ahead in that regard there may be some pressures to follow suit.

Australia, too, has seen productivity and real income per capita slump somewhat alarmingly over recent years. 

Trump's inauguration speech promised widespread oil drilling to bring prices down.

And there followed a sweeping range of executive orders to firm up border security, freeze Federal hiring and improve government efficiency, and remove DEI programmes and regulatory red tape, among others.

One of the biggest unknowns surrounds the implementation of tariffs, but the new administration brings a wave of optimism for change after a difficult few years of cost of living pressures through the pandemic.

"Don't bet against America", as they say.